Berkshire Agrees to Stop Selling EquityComp Policies in California

California Insurance Commissioner Dave Jones on Tuesday approved an order agreed to by California Insurance Co. and Applied Underwriters Captive Risk Assurance Company Inc. under which they will stop selling workers’ compensation policies that the two Berkshire Hathaway companies used without filing key addendums to the policies.

The policies, called EquityComp, were supposed to be filed with the CDI for the commissioner’s review and approval, according to a release from Jones on Tuesday.

The release states the companies will work with the department’s actuaries to agree upon fair terms for calculating future claims that would apply to existing EquityComp policies.

“Insurance companies are required to file rates and terms so we can make sure they are complying with the law,” Jones said in a statment.

The order halts the issuance of new EquityComp policies unless and until Jones approves them. The order also provides relief under existing EquityComp policies, which includes eliminating punitive requirements for posting collateral, and specifying new, appropriate loss development factors. The order does not affect the ability of any employer to challenge the legality of the EquityComp policies.

Jones’ action stemmed from his decision that a complex insurance scheme in a case involving a company called Shasta Linen. Shasta Linen, a small employer, purchased an EquityComp policy from CIC and AUCRA. Shasta Linen brought a case before the commissioner, challenging the legality of the policies.

Jones found that the insurance companies issued the policies and rates without his approval. He also ruled that the companies designed the program with the intent of avoiding the review of insurance regulators.

Related:

• Class Action Follows California Commissioner’s Decision in Applied Dispute
• Applied Underwriters’ Workers’ Comp Business Faulted by California Regulator
• California Commissioner Issues Cease and Desist Order to Applied